Price Compression A Major Threat In 2007

April 13, 2007
Market share erosion and employee retention other concerns.

The chief threat businesses face this year is price compression. Sixty-three percent (63%) of Aberdeen Group's survey of 3,170 respondents named price compression as one of their primary competitive threats (#1 threat for 35%), with 18% identifying market share erosion as the predominant issue and 17% naming employee retention as the key challenge.

From a global perspective, European companies are slightly more concerned than their North American counterparts about price compression (39% vs. 35%) and employee retention (18% vs. 16%), but are less worried about market share erosion (15% vs. 18%.)

The size of the company is a factor with regard to price compression. For large companies ($250 million sales) only 16% cite this as a concern while 73% of small businesses (under $50 million) see this as a major concern.

Those identifying pricing pressures (58%) or market share issues (55%) as challenges planned to invest in sales and marketing to thwart the threat. Meanwhile, companies primarily concerned about employee retention plan to mitigate their risk by investing in additional staffing, a top two-budget item for 60% of this group.

The destructive tendencies of the top three 2007 competitive threats can be mitigated, in part, by strategic investments in customer and employee facing technology, explained Alan Hubbard, sales & marketing group, Aberdeen Research. "Investments in the areas of personalization and analytics can have a pronounced impact on business deterrents and profitable growth. These technologies shape the customer experience and provide invaluable insight into market dynamics. Better information and real-time insight into customers and consumers are key components to managing price pressures and market share issues. In the end better business also means happier employees leading to improved retention."

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